8 Ways to Rapidly Increase Your Score
If you have a bad credit score, all hope is not lost. You can take some quick steps to improve your credit and qualify for the best possible lending options for your needs.
1. Start Making 100% On-Time Payments
The largest determining factor in your credit score is making on-time payments. In fact, on-time payments make up 35% of your total credit score. Ignoring this and looking for other, easier solutions will leave your credit score lurking in the lower levels!
Starting today, make every single payment on-time. If you can’t afford to pay off your cards in full each month, make sure you always make the minimum payment by the due date.
Using automatic payments can help make sure you never forget and have a late payment. You can set that up at your credit card issuer’s website or using your bank’s bill pay with participating credit cards.
2. Hunt Down and Remove Incorrect, Negative Information
Your credit report is a treasure trove of information on your past borrowing and payment habits. It can also include information about collections and judgements from unpaid rent, parking tickets, and medical bills.
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According to a study by the Federal Trade Commission, 1 in every 5 credit report has errors. It would be a huge bummer to find out your credit score is low thanks to someone else’s mistake!
Thankfully, you are entitled to a free credit report from each of the three major reporting bureaus, TransUnion, Equifax, and Experian, every year. You can get that free credit report at the official government website, annualcreditreport.com.
Once you have your credit report, give it a thorough inspection for errors. If there is anything negative that shouldn’t be there, work with the creditor or the reporting bureau to get it removed.
3. Pay Off Credit Card Balances
The second biggest portion of your credit score is determined by your outstanding balances. This 30% of your score is determined by adding up your total credit card debt and dividing by your total available balance on all of your cards. This is called your debt utilization ratio. Don’t include installment loans like mortgages or student loans when calculating your debt utilization ratio, only credit cards and lines of credit.
Having $0 in outstanding balances is the fastest way to increase your credit score that you have total control over. Carrying a small balance to boost your score is a myth. Completely paying off your open balances on any credit cards or lines of credit will put you on the fast track to a better score.
You should always try to keep your debt utilization under 20%, or as close to zero as possible, to get the best credit score possible.
4. Increase Available Credit Card Balances
There are two ways to improve your debt utilization ratio. The easiest, and typically best, method is to pay off your credit card debt. You can also increase your credit card balances for a smaller improvement.
For example, let’s say you have 3 open credit cards. Your total balance owed across all three cards is $5,000, and the total limit on all three cards combined is $10,000. Right now, you have a 50% credit utilization ratio.
If you pay off $2,500, your utilization will drop to 25%, which will almost certainly increase your credit score the next time your credit card companies report your balance to the credit bureaus.
However, if you also ask for a credit limit increase on all three cards and can increase your open, available balances to $15,000 from $10,000, your new credit card utilization is about 17%, which puts you below the key 20% threshold.
5. Avoid Opening and Closing Any Cards
The length of your credit records makes up 15% of your credit score score. It takes many years to improve your credit length, but just a few minutes to make it worse.
Your credit score measures this portion of your credit score file by searching at the average age of open accounts. If you have credit cards and they’re 4 years old and 6 years old, your common age of open credit is 5 years.
Opening a new card will give you 3 cards that are zero, four, and six years old. Now your common age of open accounts is four years. In an instant, you lost a year! Open 3 playing cards at once, and now your common age is 2 years, which could lead to a sizeable drop in your credit score rating.
In addition, making use of for new credit score cards or loans leaves inquiries on your credit report, which contributes to 10% of your credit. Each new inquiry will cost you a few points for your score, and they upload up fast.
If you need your score to grow, stay away from starting and closing debts for a little while.
6. Pay off and Remove Collections
Collections on your credit report can lead to a large nosedive in your credit score rating. Collections show on for your account when you don’t pay a debt, like a credit card, loan, clinical bill, or parking ticket. If you don’t pay quick enough, the money owed is sent onto a collection agency and show up as a collection on your credit file.
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Sometimes the collections are just going to run their course. Most of the time, they may be in your credit report for 7-10 years. However, a few creditors are inclined to have them removed from your credit score report if they may be incorrect (see above) or resolved.
Contact the original creditor directly to see if you can work with them to take away the collection from your credit score if you pay it off. Sometimes you may ought to do some homework if it has been sold to a 3rd party collection company, and you may should work with them to get the negative item eliminated after the debt is satisfied.
7. Open a Secured Credit Card
Stay away from establishing new credit cards, except secured cards! If you have a very thin file on your credit report meaning you don’t have a lot of previous accounts then banks will allow you to open a secured credit card to help rebuild your credit score.
A secured credit score card requires starting a bank account and creating a deposit for the full credit limit. That way, in case you stop paying, the financial institution isn’t worried about losing money.
But you are not going to miss out on paying. Make it a new beginning for credit score and consistently make 100% on-time payments.
8. Become an Authorized User
Most credit cards allow adding new credit card users to your account. If you have a friend or relative with an excellent credit score that trusts you, they could add you as a user to their account, and you would instantly inherit their history!
Note that some card issuers do not record for authorized users, and a few lenders exclude AUs while reviewing your creditworthiness.
However, in lots of cases, getting authorized user status will help pump up your credit score rating and credit report. Your results can also vary depending their payment history so make sure you are taking on a good card.
Good Credit is a Marathon, Not a Sprint
These are all strategies which could raise your credit rating in the quick-term, but there are many long-term factors as well. Your credit score restoration won’t manifest overnight, and can take years of on-time bills and ideal borrower behavior.
If you hold to creating on-time bills and maintain your balances low, you’ll be on course to better credit score with out doing any more work.
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